Amphenol Corporation

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Amphenol Corporation

385 Hall Avenue
Wallingford, Connecticut 06492
U.S.A.
Telephone: (203) 265-8900
Fax:(203)265-8793
Web site: http://www.amphenol.com

Public Company
Incorporated: 1942 as Amphenol Electronics Corporation
Employees: 11,600
Sales: $1.36 billion (2000)
Stock Exchanges: New York
Ticker Symbol: APH
NAIC: 334417 Electronic Connector Manufacturing; 335921 Fiber Optic Cable Manufacturing; 335929 Other Communication and Energy Wire Manufacturing

Amphenol Corporation manufactures interconnect products—cable and connectors. Its fortunes have risen along with those of the electronics industry. Over the decades, Amphenol has been a prime target for corporate takeover attempts as it has itself acquired numerous companies in expanding markets. Venture capital firm Kohlberg Kravis Roberts & Company (KKR) owned half of Amphenol’s stock in 2001. More than half of Amphenol’s products end up in communications applications (voice, video, and data); about 20 percent go to the aerospace industry; and another 20 percent are used in other industrial, transportation, and miscellaneous enterprises.

Origins

Amphenol Electronics Corporation was founded in 1942. The Chicago-based company produced components for the nascent electronics industry; it had plants in Illinois, Connecticut, and California. By 1956, annual sales had reached $27.3 million (profits were $1.3 million). After selling shares over the counter, Amphenol began trading on the New York Stock Exchange in May 1957. The next month, Amphenol acquired Gas Purification and Chemical Company, which it renamed Amphenol Great Britain Ltd.

Amphenol merged with the George W. Borg Corp. in December 1958, forming Amphenol-Borg Electronics Corp. Based in Wisconsin, Borg manufactured electronic instruments, automobile clocks, and textiles. Meanwhile, the growth of electronics had Amphenol supplying the aircraft, telephone, computer, and television industries, and winning million-dollar military contracts. In 1959, the new company posted income of $3 million on sales of $55 million.

Matthew L. Devine was elected president of Amphenol-Borg in January 1960. Sales were $60 million for the year; they continued to climb until 1963.

Amphenol-Borg merged with another electronics concern, FXR, Inc., in May 1961. This boosted Amphenol’s microwave technology. A Canadian subsidiary was added in November 1964. The buying spree continued, though a merger with Federal Sign fell through. Amphenol did manage to acquire Jefferson Electronics, Cadre Industries, and Micromega. By this time, the word “Borg” had been trimmed from the corporate name. Sales were rising again, to $80 million for 1965, which produced income of $2.5 million.

Other electronics companies were bought, new plants were built, and a French affiliate was licensed in the next two years. In 1967, another company launched a dramatic takeover attempt against Amphenol that culminated in allegations of corporate espionage.

Indeed, the entire year was filled with speculation about who would land what Wall Street considered a most attractive takeover candidate due to its strong earnings. Early in the year, Solitron Devices, Inc. began targeting the company. Solitron made transistors, semiconductors, and other electronic components.

In early October 1967, Amphenol worked out a hurried deal to merge with Sangamo Electric Co.; however, the continued rise in Amphenol’s share price soon scuttled that arrangement. At the height of the takeover drama, Amphenol President Matthew Devine informed the press that an eavesdropping device (or “bug” ) had been placed inside one of his home telephones.

Solitron ultimately built up a 25 percent shareholding in Amphenol. By the end of 1967, however, Amphenol had agreed to merge with Bunker-Ramo Corp., a maker of specialized computers controlled by Martin Marietta Corporation.

Using the Name “Bunker Ramo” in the 1970s

The new company took the Bunker Ramo name. Amphenol Chairman Matthew Devine was named president and CEO, while John E. Parker remained in his position as chairman at the new Bunker Ramo.

The Amphenol Components group provided up to 70 percent of Bunker Ramo’s income in the 1970s. The unit’s income was $23.6 million in 1974, but slipped to just $3.7 million in 1975. According to Electronics magazine, innovative connectors from competitors such as AMP Inc. helped eat away at market share.

A comprehensive reorganization was begun in 1975 by Bunker Ramo President George S. Trimble. Amphenol Components had been divided into Industrial, Cadre, Connector, RF, Instruments, and Sales divisions. After the restructuring, there was a single Amphenol group for all Bunker Ramo connectors. (Bunker Ramo’s other four divisions were Information Systems, Instruments, Electronics Systems, and Borg Textiles.) The Amphenol group was divided into Amphenol North America and Amphenol International in 1977.

Bunker Ramo also cut unprofitable operations making automobile clocks and certain textiles. By the late 1970s, the company had recovered from its earnings slump, thanks to a new emphasis on marketing and R&D. Electrical and electronic connectors remained Bunker Ramo’s most important line of business.

Bunker Ramo Corp. earned $27.2 million on revenues of $467.6 million in 1980. Again, rising sales made the company an attractive takeover target; a relatively low debt load of $74 million added luster. Fairchild Industries Inc. bought 21 percent of Bunker Ramo stock from Martin Marietta Corporation in 1979 but was ultimately not successful in effecting a merger, in spite of offering $96 million for the rest of the shares. United States Filter Corporation also had made acquisition overtures.

Allied Control in 1981

Duane L. Burnham replaced George Trimble as president and CEO of Bunker Ramo in October 1980. Under Burnham, the company began seeking acquisitions that would give it more leverage in impending merger discussions. Finally, diversified chemical maker Allied Corp. agreed to pay $358 million for the company in May 1981.

Amphenol continued as an operating unit of Allied, later Allied-Signal Inc., under the name Amphenol Products. By the mid-1980s, Amphenol had manufacturing facilities in France, West Germany, Great Britain, Italy, and Canada as well as affiliates in Japan and India. It also boasted the world’s largest network of electronics distributors.

Amphenol bought Thomson-CSF’s Socapex S.A. connector subsidiary in December 1985 for FFr 199 million ($26 million). Socapex already had been licensed to manufacture Amphenol’s line of Bendix connectors (taken on during the Allied acquisition) since 1960. The purchase brought Amphenol expertise in high technology connectors.

Amphenol posted an operating income of $33 million on sales of $487 million for 1986. In December of that year, Allied-Signal placed Amphenol on the market, as well as six other operating units in its electronics and instrumentation sector.

A total of 30 firms bid to buy Amphenol, including Litton Industries, Emerson Electric, Cooper Industries, and Siemens. In April 1987, Amphenol Acquisition Company, a newly formed subsidiary of the LPL Investment Group of Wallingford, Connecticut, beat them out with an offer of $430 million. LPL was a publicly traded investment company that had been formed only two years earlier to make acquisitions in the electronics and communications fields. Its sales were less than $100 million a year before the Amphenol purchase. In December 1985, LPL had acquired Times Fiber Communications, Inc., which would become part of the Amphenol empire.

LPL president Lawrence J. DeGeorge told the New York Times that Amphenol was so attractive because it would take 20 years to build a market leader in the industry. “We serve the same marketplaces,” he added, “so the products are extremely complementary to the businesses we’re already in.”

However attractive Amphenol may have seemed at the time, net sales fell from $442 million in 1988 to $421 million in 1990. Losses peaked at $14.5 million in 1989. This, and the junk bond financing that allowed LPL to buy it, left Amphenol teetering on the edge of bankruptcy by the early 1990s. It had debts of $373 million in 1991 versus $19.5 million of equity, reported the Wall Street Journal. The Persian Gulf War, however, was stimulating demand for its connectors.

Company Perspectives:

We have spent much effort in the past few years in moving our product lines to growth areas, especially in the communications market, and we have aggressively developed new products to address the rapid deployment of digital and fiber optic technology and the converging markets of voice, video and data communications. We have also made significant investments in new equipment and processes that allow us to keep pace with the growth, enhance quality and manufacture at a very competitive cost.

Public Again in 1991

In August 1991, Amphenol announced an initial public offering (IPO), part of a restructuring plan. Before the offering was announced, Shearson Lehman bought $50 million of the company’s $215 million in junk bonds for 70 cents on the dollar, according to the Wall Street Journal; the subsequent IPO reportedly angered these bondholders, who had taken a loss on their investment.

The IPO was expected to net $160 million; there would be a concurrent offering of $100 million in senior secured notes. Amphenol was approved for listing on the New York Stock Exchange. Difficulties in obtaining financing forced Amphenol to delay its offering for two consecutive weeks in August 1991.

Amphenol parent LPL recently had been taken private in a management-led leveraged buyout of its own. As part of its IPO, Amphenol would issue LPL $65 million in stock for its sister connector companies Pyle-National Inc. and Amphenol Interconnect Products Corp. The three combined companies had 1990 sales of $497 million.

In May 1992, the company announced that it was cutting 5 percent of its 3,800 North American jobs and 10 percent of the 1,700 in Europe. Company President Martin H. Loeffler estimated the cost savings would exceed $11 million a year. As part of the restructuring program, Amphenol was shifting more of its manufacturing to its Bendix and Pyle units.

LPL acquired Times Fiber Communications, Inc. (TFC) in late 1992. Amphenol merged with LPL and TFC as part of the same transaction. TFC was a leading supplier of the coaxial cable used by the cable television industry, with annual sales of $78 million, mostly from the United States. The company was expanding aggressively overseas; a joint venture in China was announced in late 1993. Thanks to its overseas success, TFC was contributing a third of Amphenol’s total sales by 1995.

By October 1995, however, Amphenol was suffering the discontent of a thousand workers who went on strike at the company’s connector manufacturing facility in Sidney, New York. This one plant produced 80 percent of Amphenol’s output of aerospace connectors; the strike threatened to delay a number of military and commercial aviation programs.

Chairman Lawrence DeGeorge handed over the duties of CEO to President Martin Loeffler in June 1996. Amphenol announced that it was buying the Sine Companies in the same month. Sine produced connectors for industrial markets and had annual sales exceeding $30 million. Amphenol’s own sales for 1995 were $783 million.

Amphenol established R&D facilities in Hong Kong, Japan, and India during the 1990s. It bought a 51 percent interest in Taiwanese RF products provider Kai-Jack Industrial Co. Ltd. in January 1997.

Purchase by KKR in 1997

Kohlberg Kravis Roberts & Company (KKR) agreed to buy Amphenol (via KKR’s NXS Acquisition Corporation affiliate) for $1.2 billion in January 1997. Amphenol’s position in the expanding communications, aerospace, industrial, and automotive industries again made it an attractive takeover candidate.

KKR bought Amphenol during a bit of a slump for the electronics industry. Some shareholders sued to prevent the sale, feeling that the company was undervalued at $26 per share. In 1996, Amphenol posted a record net income of $17.5 million on sales of $211.7 million. Sales were up across Amphenol’s geographic range.

Amphenol bought AMP Inc.’s Matrix Sciences line of military circular connectors in October 1997. In July 1998, it sold its Italian manufacturing operations to VEAM S.p.A., a division in Litton Industries Inc. The next month, Amphenol bought Advanced Circuit Technology Inc., a privately owned producer of interconnect products.

The company continued its expansion via acquisition in 2000, as annual sales passed $1 billion. T&M Antennas Inc. (cell phone antennas), Korean Air Electronics (cell phone system-connect switches), and Confektion E Gmbh (automotive cable assemblies) were all acquired in the first five months of the year. At the same time, Amphenol was expanding its manufacturing operations in China, the Czech Republic, Mexico, and Brazil. Future acquisitions seemed likely to come outside the communications industry, on which Amphenol was becoming increasingly dependent.

Key Dates:

1942:: Amphenol is founded.
1957:: Shares begins trading on the New York Stock Exchange.
1958:: Company merges with George W. Borg Corp.
1967:: Company merges with Bunker-Ramo Corp.
1981:: Allied Corp. buys Amphenol Components division.
1987:: LPL Investment Group acquires Amphenol in an LBO.
1991:: Amphenol launches an IPO.
1992:: LPL buys coaxial cable supplier Times Fiber.
1997:: KKR buys Amphenol for $1.2 billion.

Principal Subsidiaries

Advanced Circuit Technology, Inc.; Advanced Circuit Technology; Amphenol Aerospace France, Inc. (U.S.A.); Amphenol Australia Pty Ltd.; Amphenol Benelux B.V. (Netherlands); Amphenol Borg Limited (U.K.); Amphenol do Brasil Ltda.; Amphenol Canada Corp.; Amphenol Commercial & Industrial France, L.L.C. (U.S.A.); Amphenol Commercial and Industrial UK, Limited; Amphenol Connexus AB (Sweden); Amphenol-Daeshin Electronics and Precision Co., Ltd. (Korea); Amphenol East Asia Limited (Hong Kong); Amphenol Foreign Sales Corporation (Barbados); Amphenol Funding Corp.; Amphenol Germany GmbH; Amphenol Gesellschaft m.b.H. (Austria); Amphenol Holdings Pty. Ltd. (Australia); Amphenol Holding UK, Limited; Amphenol Interconnect Products Corporation; Amphenol International Ltd.; Amphenol Italia, S.p.A. (Italy); Amphenol Japan K.K.; Amphenol-Kai Jack, Inc. (British Virgin Islands); Amphenol-Kai Jack Industrial Co., Ltd. (Taiwan); Amphenol-Kai Jack (Shenzhen), Inc. (China); Amphenol Limited (U.K.); Amphenol Optimize Manufacturing Co.; Amphenol Optimize Mexico S.A. de C.V.; Amphenol Socapex S.A.S. (France); Amphenol T&M Antennas, Inc.; Amphenol-TFC (Changzhou) Communications Equipment Co., Ltd. (China); Amphenol Taiwan Corporation; Amphenol Technical Products International Co. (Canada); Amphenol-Tuchel Electronics GmbH (Germany); Amphenol USHoldco Inc.; Amphetronix Limited (India); Connex Connector Corporation; Guangzhou Amphenol Electronics Communication Co., Ltd. (China); Konfektion E Elektronik GmbH (Germany); Korea Air Electronic Co., Ltd.; LPL Technologies Holding GmbH (Germany); Lonef Svenska, AB; Matir, S.A. (Uruguay); Pyle-National Ltd. (U.K.); Pyle-National of Canada Inc.; Sine Systems*Pyle Connectors Corporation; Spectra Strip Limited (U.K.); TFC South America S.A. (Argentina); Times Fiber Canada Limited; Times Fiber Communications, Inc.

Principal Divisions

Advanced Circuit; Amphenol Aerospace; Amphenol Air LB; Amphenol Argentina; Amphenol Australia; Amphenol Brazil; Amphenol Canada; Amphenol DaeShin; Amphenol East Asia; Amphenol Fiber Optics; Amphenol Interconnect; Amphenol Japan; Amphenol RF; Amphenol RF Asia; Amphenol SINE Systems; Amphenol Socapex; Amphenol South Africa; Amphenol Spectra Strip; Amphenol T&M Antennas; Amphenol Tuchel Electronics; Amphenol UK Operations; Times Fiber Communications.